A Full Population Auditing Method Based on Machine Learning

Yasheng Chen, Zhuojun Wu () and Hui Yan
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Yasheng Chen: Department of Accounting, School of Management, Xiamen University, Xiamen 361005, China
Zhuojun Wu: Department of Accounting, School of Management, Xiamen University, Xiamen 361005, China
Hui Yan: Department of Accounting, School of Management, Xiamen University, Xiamen 361005, China

Sustainability, 2022, vol. 14, issue 24, 1-17

Abstract: As it is urgent to change the traditional audit sampling method that is based on manpower to meet the growing audit demand in the era of big data. This study uses empirical methods to propose a full population auditing method based on machine learning. This method can extend the application scope of the audit to all samples through the self-learning feature of machine learning, which helps to address the dependence on auditors’ personal experience and the audit risks arising from audit sampling. First, this paper demonstrates the feasibility of this method, then selects the financial data of a large enterprise for full population testing, and finally summarizes the critical steps of practical applications. The study results indicate that machine learning for full population auditing is able to detect, in all samples, abnormal business whose execution does not adhere to existing accounting rules, as well as abnormal business with irregular accounting rules, thus improving the efficiency of internal control audits. By combining the learning ability of machine-learning algorithms and the arithmetic power of computers, the proposed full population auditing method provides a feasible approach for the intellectual development of future auditing at the application level.

Keywords: artificial intelligence; fraud detection; audit analytics; machine learning (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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